Days payable outstanding
How many days the company on average waits before paying suppliers for goods already received.
Formula
\frac{\text{Average payables}}{\text{Cost of sales}} \times \text{days in period}The denominator is cost of sales, not revenue: payables arise from purchases, not from sales.
How to read the number
Free financing from suppliers: the longer the period, the less of the company's own money the working cycle needs. Together with the other two periods it makes up the cash conversion cycle.
When the metric lies
A lengthening period reads two ways: a strong company is pushing its terms, a weak one simply is not paying on time. The number alone cannot tell them apart — you need the cash flow beside it.
Where it is used
The metric is calculated across every security in the catalogue and appears on the instrument card, in the multiples table and in the screener.
Also known as: days payable outstanding, payable days